Over the last two weeks, the Colorado General Assembly has vigorously debated 11 bills that will suspend or eliminate business tax exemptions, credits and exclusions when signed by Gov. Bill Ritter. During committee hearings that dragged late into the night, business owners showed up en mass to testify to the potential tax increases that the bills will mandate and the actions they say they will have to take to offset the added costs.
Some legislators advocating the bills, however, have continually questioned or caustically dismissed the validity of employers’ concerns about the bills.
To understand employers’ concerns, the Colorado Association of Commerce and Industry (CACI) conducted a survey in December of its members to accurately assess which of the 13 tax provisions, proposed by the governor last November for suspension or elimination, were most important to businesses. CACI’s members responded very clearly that four broad tax provisions, listed below in descending order of priority, are most vital to their operations:
1. Two-year suspension of the exclusion of energy for industrial and manufacturing use;
2. Three-year limit of the net- operating-loss carry-forward to $250,0000;
3. Software sales-tax exemption; and
4. Enterprise-zone investment tax credit.
Employers who responded to the survey said the loss or suspension of tax exemptions and credits would result in immediate hiring freezes, reduction in wages, layoffs, increased prices of products or services and possible relocation of operations to other states or countries.
The survey also showed that the termination of the exemptions for non-essential containers for food services and candy and soft drinks would severely impact the restaurant, food and beverage industry. CACI opposes legislative proposals that unfairly target a particular industry for the sake of political expediency.
Legislators who have contended that jobs will not be at risk after these bills become law should examine how they debated House Bill 1193, which originally was intended to tax out-of-state Internet retailers that have “affiliates” in Colorado that market the retailers and direct shoppers to the retailers’ websites.
The hearings on HB 1193 by both House and Senate finance committees generated considerable testimony by business owners whose operations would have been jeopardized if the introduced version had become law. The outcry from these businesses caused legislators to significantly amend the bill, thus saving hundreds of jobs.
The rewrite of HB 1193 illustrates that some legislators did not analyze the potential harmful consequence of this bill to businesses before it was introduced. The same point can be made of the other tax bills.
In addition, legislative proponents of the tax bills have asserted that the business community has not shared in the “shared sacrifice” needed to balance the state budget. We would argue, however, that the business community has “contributed” its fair share by legislative mandate.
Since 2008, the legislature has required the business community to contribute $339 million in additional taxes and fees to help balance state budgets.
Now, the legislature and Gov. Ritter are poised to add to this amount another $231.3 million over the current and next two fiscal years if the business tax bills become law.
Colorado lost 198,400 jobs last year, and our state’s unemployment rate for January was 7.5 percent for January. Consequently, we can only urge the legislature to focus on assisting employers — whose ability to retain and create jobs is absolutely vital to economic recovery —instead of burdening businesses with the tax bills.
We cannot think of a worse time to increase taxes on employers who are struggling to emerge from the recession. We remain perplexed, therefore, that many Democratic legislators, who control both the House and the Senate, ignored or dismissed employers’ sincere objections to the tax bills, given the evidence to the contrary.
Chuck Berry is President of the Colorado Association of Commerce and Industry (CACI) and former speaker of the Colorado House of Representatives.
